My sob story

[Tommy]

Ok, almost 4 years ago I move across country to start a new career. I had recently purchased my first house, I was already making payments on one auto loan. After starting almost from scratch, using credit to pay for most everything with the intention of beilng able to pay it off over a couple years, things have not panned out according to plan.
Now, I have about 35k of combined cc debt between my wife and I, on top of that I now have two cars I am paying for, house+ related expenses...I have cut as much out of my budget as I can. Unfotuneatly I am not permitted to do a second job: 1) Unauthorized by employer (law enforcement) and 2) I work from 1400-2200, my wife works from 000-0830. Whe have a 7 month old, and no money for a sitter or daycare.
I am seeing no raises in the future as the state (Nevada) is in terrible financial shape. My wife is trying to find a better job, but now she is making less than a dollar above min. wage. The only things I have of value are my house, and a project car I have had for over 8 yrs.
I have a collection agent harrassing me, and we are barely breaking even from paycheck to paycheck. The house and car loans are current, but we push the grace periods often. I hear mixed opinions regarding BK.
I am sure these questions have been answered, but I dont even know where to start. I am now being backed into a corner, as of now a co-worker of mine is having his wages garnished and I want to avoid this.
Now, providing I file under the appropriate chapter, what items of mine will they try to "liquidate". I havent made a credit card purchase in well over a year. I cashed out my pension from my old job about 1.5 years ago. Will I have to worry about having my pension garnished? What are all the items that are looked at. I have no stocks, 401k, savings...ect. I have a checking account and a savings. Both of which are as dry as the air out here. There is probably another dozen questions I have but its late and I cant think of them.

Any info will help, this is something I wish to research a bit before I make a knee-jerk decision.

[meateater]

Hi Tommy,
A few thoughts and questions:
have you done the means test to figure out if you qualify for chapter 7?
is there any equity in the house, is it financially sound to stay there or is it cheaper to let it go and rent elsewhere?
does it make sense to keep the cars, or would it be better to get rid of them and get something without a payment?
If you get rid of the credit card debt in bankruptcy, will you be able to comfortably pay for the house, cars, regular living expenses?
Has anyone sued you yet (if not, you have some time before wage garnishment could happen).

The pension is most likely protected as a retirement, but once you take the money out, its fair game for creditors.

I filed years ago when my credit card debt was about equal to my annual income, and student loans that were about 1.3x my income, I could no longer pay both and filed chapter 7. the credit card debt was discharged, and I recently paid off the student loans. You're doing the most important thing right now-education yourself about the process and whether it will be beneficial to you. This is a stressful time, but it does get better.
meateater

[Tommy]

Thank you for the info. My wife an I are holding on to the house. We had to fight tooth and nail to get it and we would like to keep it. I can justify letting it go to rent as most places for rent around here are just as much as our monthly mortgage payment. The two cars is necessary. My job is a little over 50 miles from where I live, and I do not want to leave the wife with no car in case of an emergency.

[Flamingo]

Tommy - gather together a complete list of all your debts, monthly payments, sources of income, recent paystubs for both of you, a listing of all your assets and a copy of your most recent tax returns. Look in your phone book and look for attorneys who give free initial consultations - go get several. You also need to know after all this is over that bankruptcy does not solve cash flow or employment problems so if you truly cannot afford to keep your house, you truly cannot afford to keep your house. Depending on your situation in order to keep the house a lot depends on the amount of equity in the home. You may be required to file a Chapter 13 in order to keep it so go get your situation evaluated by a few BK attorneys so you know exactly where you stand.

[blessed]

If you get rid of the credit card debt in bankruptcy, will you be able to comfortably pay for the house, cars, regular living expenses?

This is the question I was going to ask. We filed with only 31k in CC debt solely because we can afford all of our other expenses just fine, but could never get ahead with the CC payments hanging over our heads.

Get your info together and go talk to a couple attorneys in your area. They can talk to you about your assets and which ones you can keep. For example we can easily keep our house and both cars by using the Federal exemptions to save them.

GL!

[bkinparadise]

<snip>
Depending on your situation in order to keep the house a lot depends on the amount of equity in the home. You may be required to file a Chapter 13 in order to keep it so go get your situation evaluated by a few BK attorneys so you know exactly where you stand.

My appologies to the OP of this thread - I don't mean to hijack this thread but I'm in a situation where my mortage is underwater (house is worth less than what I owe). I was hoping to file Ch. 7 but if I don't have equity in my home, would I have to file Ch. 13 to still keep my home? I've already retained a lawyer that has much experience in BK in my area.

[keepinitreal]

I was hoping to file Ch. 7 but if I don't have equity in my home, would I have to file Ch. 13 to still keep my home?

No, you don't have to file Chapter 13 if you have no equity in your home. If you DID have a LOT of equity, you might choose to file Chapter 13, because in Chapter 7 your house might get sold by the trustee to pay off your creditors.

Lots of people who file Chapter 7 have no equity but still keep their homes.

[Flamingo]

No, you don't have to file Chapter 13 if you have no equity in your home. If you DID have a LOT of equity, you might choose to file Chapter 13, because in Chapter 7 your house might get sold by the trustee to pay off your creditors.

Lots of people who file Chapter 7 have no equity but still keep their homes.

Correct. A lot of people make the mistake of wanting to keep their home due to the amount of equity they may have in the home, they truly try to keep the home but end up finding out they cannot really afford to keep the home, the plan fails and they end up going into foreclosure. Talking all this out with a qualified BK attorney is a must if you have equity in a home and want to keep your home. It's all about your income, assets, and debts, exemptions, qualifying for and what you can or cannot do as to filing either Chapter in the state in which you reside.

[bkinparadise]

Thank you for the responses to my post and again my apologies to the OP for going off the original topic.

[Tommy]

Thank you for the responses to my post and again my apologies to the OP for going off the original topic.

No, not a problem at all. I had a similar question as well.
Here is another question I have.
What can be considered an asset?

See if I undersatend this so far. If my home has equity in it, then the trustees can sell it off to pay off my debt. That being the case, I think I lucked out on that one. The way things are going with real estate I know my homes value hit botom.

Thanks for all the info so far.

[meateater]

Hi Tommy,

If you haven't done so already, I'd recommend you get the NOLO guide to filing bankruptcy (should be avaialble at the library, major bookstores, and also as a download (someone posted the link awhile back). It gives a good overview of much of the process, and helpfully gives alot of the legal lingo.

For the cars, if you've got big payments that will go on for awhile, is there any possibility of getting rid of them and paying cash for cheaper cars - it might free up your cash flow considerably.

I've never owned a house, but the piece of advise I keep seeing here (which makes alot of sense to me) is to only hold onto a house if it makes financial sense (rather than for emotional reasons). If the house is underwater, it might make financial sense to let it go rather than be tied to it post bankruptcy (but if you had to pay more to live elsewhere, it might make sense to keep it - I'd figure out both scenarios).

meateater

[SMinGA]

I agree with Meateater. We wanted to consider ALL options so we played a bit of a 'what if' game about the house.

Our house is not perfect - needs some minor work. But hubby believes he can handle those things with a little help from his dad/friend. Our mortgage is reasonable - a little under $1200 and the IRS standards for rent/mortgage for our county is about $200 higher. We looked to see what things were renting for - and for a comparable sized house the lowest it might go is $1000 but more likely we'd end up around $1200. And with going to a rental, we'd lose some options like pets and so on.

I even overlooked the tax savings (trustee will get our refunds for a while, doesn't matter to me if the amount goes down) but in the end, there is no compelling reason to give up our house. Even in terms of equity, we're not underwater. I know we wouldn't be able to sell it without putting work in (paint, carpet, appliances) and that scares me. We came to the conclusion that its best to stay. But we also know we can amend our 13 if something drastic happens to change all that.

[bkinparadise]

I talked to a county real property tax appraiser the other day and I mentioned to him about how much real property values has tanked over the Great Recession and he says property values will come back but it will take a few years. I'm willing to wait it out. I'm just hoping my Ch. 7 works out and I can move on.

Good luck Tommy and wish you and yours the best.

[Tommy]

Yeah I am willing to wait it out as well. The cars arent that big a problem. We just want to handle the credit card issues we have both accumulated. They are the only ones that we have fallen behind with.